9.2.6 The enforcement of the requirements regarding independence

This subsection addresses the enforcement of independence. Although regulations and law regarding independence may be in place, without enforcement of regulations and law there might be no benefits. Therefore this final issue is important for the discussion about independence.

Chapter 10 of the SCCG 2010 stipulates in the exploratory text that the board of directors should inform the shareholders and the capital market about corporate governance and the board’s compliance with the Swedish Code of Corporate Governance on an annual basis. The information is intended for the shareholders, other stakeholders of the company are not mentioned in the text. The requirement to publish a corporate governance report is also stipulated in the Annual Accounts Act (AAA).1 Sections 6: 6 and 6: 8 AAA require that a listed company should either include a corporate governance chapter in its annual report or publish a separate corporate governance report, which mentions compliance by the company with the relevant principles of corporate governance. If the company chooses to publish a separate corporate governance report, the annual report should mention this and the report should be forwarded to the auditor at the same time as the annual report. The SCCG 2010 is one of those relevant principles of corporate governance that should be complied with. The corporate governance chapter or report should mention which parts of the applicable corporate governance code the company departs from and – if applicable – give the reason for the departure. This section in the Annual Accounts Acts is in line with rule 10.1 of the SCCG 2010, which provides that the company should clearly state which rules have not been complied with, the reason for non-compliance and measures which are taken instead. These provisions in the Annual Accounts Act and the SCCG 2010 are in line with the comply or explain principle.

The Swedish Corporate Governance Code states that it is ‘good stock exchange practice for Swedish companies whose shares are admitted to trading on a regulated market to apply the [SCCG]’ (Swedish Corporate Governance Board 2010: 6). This means that all listed companies have to apply the SCCG 2010. This is in line with the Rulebook for Issuers of the NASDAQ OMX Stockholm Exchange that states: ‘In addition to laws, other statutes and these rules, the company must also comply with generally acceptable behaviour in the Swedish securities market. Generally acceptable behaviour is defined as the actual standard practice in the stock market for the behaviour of listed companies” (NASDAQ OMX Stockholm 2011: 47). The SCCG 2010 is given as an example of such ‘standard practice’.

Section 6: 9 AAA requires the auditor to make a statement explaining whether a corporate governance chapter or report has been prepared or not. The auditor does not need to assess the content of the chapter or report. Penalties for noncompliance with the Swedish Code of Corporate Governance 2010 can be imposed by the Disciplinary Committee appointed by the board of directors of the Exchange, according to chapter 5 of the Rulebook for Issuers. If the violation is serious, the Disciplinary Committee can decide to delist the company or to impose a fine of no more than 15 times the annual fee paid by the company to the Exchange. In case of a violation of a less serious nature, the Exchange may give a warning. The Head of Surveillance will decide whether a violation is serious or not (NASDAQ OMX Stockholm 2011: 46-47).